Bill Miller: Can't decide on Countrywide

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NEW YORK (CNNMoney.com) -- Noted fund manager Bill Miller says he's not sure whether his parent firm, Legg Mason Capital Management, will vote in favor of Bank of America's proposed $4.1 billion buyout of mortgage lender Countrywide.

Legg Mason Capital Management is one of Countrywide's largest stockholders, having raised its stake to 14.9% of the company's outstanding shares since the proposed deal was announced last month, according to Miller's most recent letter to shareholders.

The manager of Legg Mason's Value Trust called Countrywide's decision to sell "puzzling."

"The company was seeing solid deposit growth, has no apparent capital problems, was not forced by the regulators to seek a merger partner, and is in sufficiently sound condition to have declared its regular quarterly dividend at the end of January," Miller wrote in the letter, which was dated Feb. 10.

Miller indicated that Legg Mason would like to raise its stake in Countrywide (CFC, Fortune 500) to as much as 25%, and has petitioned the lender's board to remove its "poison pill" rules so it could acquire additional shares.

"Poison pills" are business strategies designed to prevent a hostile takeover. Miller said he expects Countrywide to act favorably on Legg Mason's request, since the company has already agreed to the acquisition by Bank of America (BAC, Fortune 500).

On other matters, Miller said Internet search engine Yahoo "is in a tough spot" if it wishes to remain independent. Legg Mason is the second largest holder of Yahoo, which Monday rejected Microsoft's $45 billion unsolicited takeover bid.

Miller, whose letter was written before the rejection was announced, said Legg Mason values Yahoo (YHOO, Fortune 500) at more than $40 per share, well above the $31 in cash and stock that Microsoft (MSFT, Fortune 500) offered. He said Microsoft will need to add incentives to complete the deal.

"We expect Microsoft will do what it takes to acquire [Yahoo]," said Miller.

Miller, whose 15-year winning streak against the Standard & Poor's 500 index has been followed by two straight years of underperformance, expressed confidence that stocks will rebound in the next few years.

"I believe equity valuations in general are attractive now, and I believe they are compelling in those areas of the market that have performed poorly over the past few years," he said. "Traders and those with short attention spans may still be fearful, but long-term investors should be well rewarded by taking advantage of the opportunities in today's stock market."